Russian steel producers have been forced to work in challenging market conditions within the past five months, ever since Russia invaded Ukraine. The related sanctions pressure, coming mainly from the US, the EU, and the UK, has restricted Russia’s steel sales both in terms of volumes, at least to some regions, and in terms of payments, insurance and shipments. Although Russia is still able to export, the process has become much harder for the mills, specifically as the geographical range of sales has changed and concluding a deal takes a lot of time while the market is rather volatile.
According to Russian officials, Russian steel export volumes decreased by 20 percent in the April-June period this year. “Russian producers are now working in conditions of limited access to Western markets,” Russia’s Minister of Industry said. It was also underlined that local consumption decreased substantially, which forced Russian mills to cut capacity utilization rates from 93 percent to 80 percent on average. According to the minister, Russia’s MMK is under the most pressure with 93 percent, followed by Severstal at 72 percent. Local producer NLMK, according to the market information, continues working at around 90 percent, being not under direct sanctions, at least not yet.
In the flats segment, Russia’s hot rolled coils (HRC) are mainly being sold to Turkey and India and to the GCC and some Asian countries on occasional basis, while slabs are sold primarily to China, followed by Turkey and the EU with much lower volumes. It is worth mentioning that in Europe only NLMK is active, not yet being restricted. In the billet segment, Turkey, Egypt, China and Taiwan are the largest buyers from Russia, while the country’s longs have been barely traded at all, SteelOrbis estimates.
Still, even when able to find an international buyer, Russian mills are still forced to sell at a significant discount as a compensation for the increasing risks of dealing for Russian origin steel. “The profitability of exports is not the same as it was a year ago. … Mills are forced to enter the new markets and to work at a discount. With the current exchange rate, export sales are barely marginal and sometimes are economically inexpedient,” the minster said.